BRITISH VIRGIN ISLANDS Law and Practice Contributed by: Matthew Cowman, Alex Drysdale, Rosalind Nicholson and Omonike Robinson-Pickering, Walkers
committee of directors, such as approving a plan of merger, consolidation or arrangement. 8.3 Business Judgement Rule The board of directors of a BVI company benefits from the “business judgement rule”, under which the BVI courts will only interfere with the decision of the board of directors of a company if it is determined that no reasonable board could have concluded that such decision was in the best interests of the company and/ or that it could not reasonably be concluded that the decision was taken for a proper purpose. Indeed, as long as a decision of the directors is made in good faith and for a proper purpose, the BVI courts will not concern themselves with the merits of the decision from a commercial perspective. 8.4 Independent Outside Advice The board of directors of a BVI company will typi - cally take advice from legal counsel on a transaction, and from financial, accountancy and tax advisers. The board may also seek a fairness opinion to be compiled by a qualified investment banker, which will evaluate the fairness of the price offered with respect to the acquisition. To the extent there are any members who seek to dissent from the merger and exercise their statutory dissent right, a company may also need to engage a valuation or appraisal firm to seek to agree on the fair value for the shares. 8.5 Conflicts of Interest Allegations of conflicts of interest made against direc - tors often arise in the context of shareholder disputes. However, there are no judicial decisions focusing on this aspect of a director’s duties, as far as is known.
statutory merger, the scheme or arrangement and the plan of arrangement. The Act contains squeeze-out provisions, but these apply only where the hostile par - ty holds 90% of the votes of the outstanding shares entitled to vote and 90% of the votes of each class of share entitled to vote as a class. The squeeze-out provisions may also be restricted or disapplied in the company’s Memorandum and Articles of Association. 9.2 Directors’ Use of Defensive Measures BVI law allows for the use of defensive measures by directors, subject to the directors complying with their fiduciary duties. 9.3 Common Defensive Measures It is possible for a BVI company to structure its Memo - randum and Articles of Association to provide pro - tection from a change of control through a “poison pill” or similar provision. Examples of such defensive measures include the ability to issue blank cheque preference shares, staggered boards, the removal of directors only by a supermajority vote, and restrictions on the ability of shareholders to requisition meetings. 9.4 Directors’ Duties The board of a BVI company will be required to com - ply with its fiduciary duties in respect of any proposed acquisition (such as the directors’ duty to act honestly and in good faith and in what the director believes to be in the best interests of the company); see 8.1 Principal Directors’ Duties . 9.5 Directors’ Ability to “Just Say No” Any right of the directors to “just say no” and take action that prevents a business combination will be subject to the requirement to comply with their fiduci - ary duties in respect of their good-faith consideration of any bid, whether unsolicited or not, and an assess - ment as to whether or not the business combination would be in the best interests of the company, noting that the BVI courts will not concern themselves with the merits of a decision of the directors from a com - mercial perspective as long as it is made in good faith and for a proper purpose.
9. Defensive Measures 9.1 Hostile Tender Offers
Whilst hostile tender offers are permitted, it is much more common to see recommended offers for the acquisition of publicly listed BVI companies. Indeed, the opportunities to effect a hostile acquisition of a BVI company are limited and, of the structures avail - able, only a tender offer is generally practicable for a hostile bid, as each of the other mechanisms would require a board recommendation, including the BVI
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